Conglomerate to Be Allowed 10 Percent Ownership of Bank Stock

Business groups, including the top-30 conglomerates, can hold up to 10 percent of bank stocks from next year. Although the groups will only be able to exercise their voting right on 4 percent of the shares, a company that holds 10 percent of bank shares can exercise its voting right on the whole holding of stocks three months after the company`s separation from the group.

The government, the Millennium Democratic Party, and the Democratic People`s Party decided 9 bills on finance-related law, including the revision bill on banking law, which will be introduced to the next regular session of the National Assembly, in their high ranking policy consultation meeting between the government and the parties on Friday. Jin Nyum, Deputy Prime Minister and Minister of Finance and Economy, and Kang Hyun-Wook, the Chairman of the Policy Committee of the Millennium Democratic Party, attended yesterday`s meeting.

The government and the parties agreed to raise the limit for the bank stock ownership of the same-person (one stockholder plus an affiliate person) from present 4 percent to 10 percent, and to allow the large business groups` bank share holding up to 10 percent. But to prevent the conglomerates from controlling over bank management, the government decided to restrict the groups` voting rights for bank stock in excess of 4 percent. The government also decided to keep the current 15 percent same-person ownership limit for the provincially-based banks.

A conglomerate will be permitted to exercise its voting rights for the excess shares through the approval of the Financial Supervisory Commission if it reduce the assets proportion of non-financial business to below 25 percent of its overall assets or change it as a financial-focused company by reducing the total value of its non-financial business assets below two trillion won.

The revision bill on banking law that the government and the parties decided is an improvement from the draft of the revision bill on banking law that planed to restrict the bank stock ownership limitation of conglomerate for 4 percent, which was announced by the Ministry of Finance and Economy at a recent public hearing.

The Deputy Prime Minister Jin said, ``Although the government tried to limit the bank share ownership ceiling of the big business groups no more than 4 percent, it decided to raise the ceiling to 10 percent as the groups` investment in the sense of removing constraints on conglomerates.``

yhchoi65@donga.com